The rupee closed at around Rs. 131.80 yesterday after an opening position of Rs. 132.60/80.
Currency dealers The Island Financial Review spoke to said export conversions were the main reason for the rupee’s appreciation yesterday (13).
"The rupee strengthened to as much as Rs. 131.50 during the day on these inflows, before falling slightly," one dealer said.
As earlier pointed out in these pages, currency dealers said small transactions cause volatility in the market because of the Central Bank limits on net open positions of the banking system.
"Moral suasion was not apparent today. What we saw was some hardcore supply and demand factors moving the market. A slight change in the supply or demand will continue to generate a high level of volatility in the market," a currency dealer said. "Today it was the inflows, which appreciated the rupee, tomorrow it could be import demand which would depreciate the rupee; this would be the trend in the weeks and months ahead."
The Central Bank releasing its monetary policy statement yesterday said that policy reversals adopted earlier this year was beginning to show results and had kept policy interest rates unchanged.
"The main driver of the balance of payments crisis was the high credit growth. Market interest rates have moved upwards and deposit rates are likewise adjusting. However, we feel credit growth is still on the upper side," a dealer said.
Some dealers also said that they did not rule out another policy rate increase later this year.
Meanwhile, benchmark Treasury bill rates inched up after weeks of showing signs of some consolidation, as the Central Bank noted in its monetary policy review published elsewhere in this page.
At yesterday’s primary market auction, the three-months bill yield moved up to 10.95 percent from 10.86 percent a week earlier while the yield on the six-months bill moved up to 12.29 percent from 12.12 percent.
The one-year bill saw its yield stay flat, moving to 12.67 percent from last week’s 12.66 percent.
The Public Debt Department of the Central Bank has offered maturing Treasury bills amounting to Rs. 15 billion. Of the bids received amounting to Rs. 27.7 billion, only Rs. 10.8 billion was accepted by the bank.